"Buy American!"

"Are you a good American? Are you moved by the distress of your fellow-ciitzens - twelve million of them unemployed - by the collapse of industry, the decline of trade, the spread of destitution, the halt of progress in your country?" If your answer is affirmative, then your duty is clear: "Americans must buy American goods to the exclusion of any other goods, of any other products, of any other services." Prosperity can only be restored by applying "our purchasing power to the resuscitation of the American market." Led by the chain of newspapers owned by William Randolph Hearst and ably seconded by the Saturday Evening Post, we are in the midst of a campaign of unprecedented proportions urging us to turn our backs flatly upon international trade and to seek to build a self-contained national prosperity. There is much in Mr. Hearst's plea that is deserving of sympathetic attention. Recognition of the fact that the roots of economic depression extend beyond the boundaries of the United States has led many American to feel that a restoration of business stability is impossible unless this country severs, as far as possible, its economic ties with the outside world. The heavy losses sustained by investors in foreign securities and the strong presumption that the war debts will not be repaid have served to strengthen this view. Leading economists have taken the position that a serious mistake was made in developing a dependence upon world trade during the last decade, and have declared themselves in favor of durable adjustments which will restore the former reliance on home markets.

It is only natural, moreover, that we should be primarily concerned with the restoration of American prosperity. Since the onset of the world crisis the law of the jungle has prevailed in the international realm. Every nation has sought to protect its domestic market against the forces of world-wide deflation by erecting and strengthening almost prohibitive barriers against cheap foreign imports. Having found the protection that was afforded by such measures to be inadequate, some forty-five countries have abandoned the gold standard and thereby brought renewed pressure upon world prices. As the chief creditor nation, steadfast in its defense of the gold standard, the United States has, in a very real sense, been left holding the bag. Proportionately this country has suffered a greater business decline than any other, with the possible exceptions of Germany and Poland.

But even a superficial glance is enough to disclose the fundamental fallacy in the "Buy American" campaign. For more than fifty years the United States has maintained a "favorable" balance of trade. Even in the darkest days of the depression there has been a relatively substantial surplus of exports over imports. Foreigners can only purchase American products when they are obtainable at world prices and when they can secure the necessary American currency or its equivalent. If the United States should seriously curtail the importation of foreign goods, and in addition, as Mr. Hearst suggests, suddenly discontinue the annual mass pilgrimage to Europe, there would have to be at least a dollar-for-dollar decline in American exports. Moreover, it might turn out to be much worse. If it is patriotic and wise for all Americans to limit themselves to the purchase of American goods, it is only logical for the British, Chinese, and other foreigners to boycott all American goods. In fact, Mr. Hearst heartily commends the "Buy British" movement as a model for us to emulate.

The best that could be hoped for, consequently, would be the reshuffling of existing purchasing power, The producers for the home market would gain at the expense of those who are dependent up on the maintenance of our export trade -with the farmers, as usual, bearing the bulk of the burden. There would be no increase in the total purchasing power of the country. In practice, however, the effect of such a movement, if it could be successfully organized, would be far more serious than a mere reapportionment of the national income. It would give renewed impetus to the deflationary spiral and nullify all the efforts to check it.

Among the many factors which Mr. Hearst has not taken into account, our present position as a creditor nation is perhaps fundamental. For the first century and a quarter of our national existence we were a net debtor by a considerable sum. As such, our commercial policy had very little influence upon the international financial structure, upon prices, or upon the flow of world trade. While tariffs were strenuously debated as an internal issue, it really made relatively little difference whether a given commodity was produced at home or purchased abroad. Such differences as there were could be measured by comparative prices.

Since the World War, however, an entirely new situation has arisen. As the chief creditor nation we must provide for the receipt of interest and sinking-fund payments. International payments can be made in only three ways - by the transfer of goods (including gold), services, or securities. It follows, therefore, that a creditor must either maintain an import surplus of goods and services, or grant new foreign credits to cover the unpaid balance. As the United States has been unwilling to increase its imports through fear of disturbing the home market and has been at the same time desirous of expanding its export trade, it became necessary during the period of 1919 to 1928 for this country ot indulge in a veritable orgy of foreign lending

The effect of the sudden termination of this lending at the time of the stock-market crash in 1929 is too well known to bear repetition. The pressure upon debtors to obtain foreign exchange to meet impending payments led them to throw large quantities of commodities on the world markets at reduced prices, and to curtail imports drastically. The latter was accomplished by raising tariff rates, by imposing import restrictions, and by the method now proposed for our consideration - buy at home campaigns. For the debtors some such action was imperative if they were to meet there obligations, but the contagion spread among creditors as well. The United States passed Hawley-Smoot Tariff Act in June, 1930; France imposed drastic import quotas and called in her short-term foreign balances; Great Britain suffering more acutely than others at the time, abandoned her historic free-trade policy and suspended payments in gold. Each of these moves served to make the weight of existing debts more burdensome. With world trade reduced to less than half of its previous value and with international lending practically non-existent, the structure of international indebtedness became dangerously topheavy. Even after taking drastic steps to preserve solvency, many countries were forced to default; in others, such as Germany, default was avoided only by the tying up of short-term loans indefinitely.

To the dyed-in-the-wool isolationist this chronicle of the difficulties encountered in the past three years is merely an illustration of the pitfalls of economic internationalism. Why, he asks, should we be so concerned about foreign trade when even in good years less than 10 per cent of our total production is marketed abroad? Why not concentrate on the home market - the richest in the world? If we include Latin America and Canada in our economic sphere, there is no question that the United States could develop a high degree of national self-sufficiency.

While and excellent theoretical case may be made for insulating ourselves from the vicissitudes of the international market, the practical objections are unanswerable. Although this country is less dependent upon foreign trade than any other of the leading commercial Powers, there are many types of agricultural and industrial activity which rely largely upon foreign markets. We normally raise nearly twice as much cotton as is required for domestic needs, while a large portion of our annual production of tobacco, wheat, petroleum, and copper can only be disposed of abroad. Only about 8 percent of the output of our factories is exported in normal times, but half of the motor cycles, one-quarter of the agricultural machinery, and 40 per cent of the typewriters are sold overseas. No doubt readjustment could be made, but thousands of men and women, skilled and unskilled, would pay a heavy price during the transition period and many of them would probably never find new employment. Moreover, even when a very small proportion of the total output is sold overseas, the price is determined by international conditions. Isolation would have to be completed to be effective. Halfway measures, such as are ordinarily proposed, would be far more destructive than a thorough-going system of "autarchy."

Very few of the advocates of national economic self-containment are aware, however, of the full implications of their proposals. Mr. Hears certainly is not. Cessation of purchases from foreign countries would automatically deprive all foreigners of the means of payment of interest of principal of all loans, public and private, owed to the United States. This would involve not only the cancelation of eleven billion dollars of intergovernmental indebtedness, but of some fifteen billion dollars of private investments as well. Even dividends on direct investments cannot be paid except in goods or services. Offhand, we would say that neither Mr. Hearst nor the Saturday Evening Post has exhibited any notable enthusiasm for the cancelation of war debts.

Various schemes have been suggested for permitting payment in something other than goods or services, but upon examination it will be found that they only defer or camouflage such payment. Even the receipt of gold would be of practically no value unless the gold were used for the purchase of commodities or services. The uses of gold as a metal are strictly limited: it cannot be eaten or worn; additional amounts are not needed for internal currency; and consequently it would lie idle in the vault of the Federal Reserve Bank, a mere shadow of its former glory. Similarly the transfer of ownership of foreign business enterprises or colonies would be useless unless we were willing to receive the benefits in some concrete form. If we were not allowed to travel abroad or even purchase foreign periodicals in place of the Hearst publications, our economic empire would become worthless - as it is rapidly becoming through the pursuit of our present policies.

It is not likely that the "Buy American" campaign will in itself have any marked effect on foreign trade. Very few persons are willing to inquire regarding the goods they purchase. In these days, moreover, the average housewife is ruled by the thought of price regardless of other considerations. The fact that Japanese rag rugs can be landed in this country at a cost of six cents each, including duty, while the cost of production of similar articles in the United States is twenty-nine cents, if true, is in reality the best possible argument for buying the Japanese product. But even if the "Buy American" campaign should make more headway with the public than seems likely to be the case, the fact remains that no business concern worthy of the name would pass by a cheap foreign product in order to purchase an American-made article of the same quality at a markedly higher price. The steel industry, for example, not likely to purchase inferior American manganese if it can obtain a higher quality of Russian or South American manganese for less money. One even wonders whether the pulpwood used in manufacturing paper for the Hearst press is entirely of American origin?

The chief danger of the campaign is not its direct effect, but the possibility that, by befogging the public mind, needed tariff reform will be rendered the more difficult. No lasting relief can possibly be obtained for the world's ills until tariff rivalry has been checked. With the World Economic Conference scheduled to meet before many months, it is important that the United States should be in a position to make drastic concessions to restore international business activity. Such a step is bound to be hindered, if not rendered impossible, if the passions of nationalism are unnecessarily inflamed. Good patriots will not "Buy American."

America has become a "service related" industial nation and so it would be difficult to buy American completely. I do agree that when possible, we should buy American unless you are financially unable to afford American made goods and services. But we should definitely boycott nations who denigrate our nation and it's leaders such as France, Germany, Russia, China, and North Korea. We of course are unable to boycott OIL from the middle east because if we bought only American produced oil and oil products, we would have to give up using anything that requires oil or oil products because most of them would have been produced using foreign oil to make them. Most if not all electronic gadget housings are made from petroleum products.

I like Milton Friedman's analysis of the balance of trade. We send little pieces of paper with cute pictures of Ben Franklin to Japan and they send us luxury automobiles. And this is supposed to impoverish our country?

It's funny how some bad economic ideas keep coming back. In 1937 or so some in the UAW wanted to demolish assembly lines to increase the number of workers it would take to make a car. In 1982 the Office of Technology Assessment darkly warned about looming massive unemployment from industrial robots.

But nothing has been as persistent as the demands for protection from foreign competitors. And it is as foolish today as it was in the eighteenth century. People always want to overlook the fact that the money saved on a 'cheap' import lets you buy other things that employs other people. We'd be a more prosperous country if the 2/3 of the money we spent on domestic sugar and the people who produce it went to improve the lot of poor foreigners, while we used the savings for other things and put our talented people to work making things more valuable than sugar.

I wonder if this the same Max. Stewart as the article's author:

MAXWELL STEWART:

Editor of Public Affairs Pamphlets from 1936 - 1977, published by Public Affairs Committee located at the same address as the Communist-run International Publishers (381 Park Ave. S. N.Y. in 1977). Over half of the pamphlets fall into the category of sex education/home and family living and are therefore included in sex education bibliographies for teachers and students. SIECUS officials, Genne and Emily Mudd, were members of Public Affairs Committee. SIECUS directors, Duvall, Kirkendall, Mace, Peterson and Pilpel helped write Public Affairs Pamphlets. Maxwell Stewart also served as co-editor of "Moscow Daily News." Under oath, Earl Browder called Stewart "one of the reliables of the Communist Party."

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The Russian Model

Among these travelers to the Soviet Union during this period were John Dewey, Rexford G. Tugwell, Paul Douglas, Stuart Chase, Jane Addams, Robert M. LaFollette, Maxwell S. Stewart, George Soule, Edmund Wilson, and many, many Others. Among the abundant literature favoring economic planning, much of it written by people who had traveled to the Soviet Union, here is a sampling of titles from the period: John Dewey, Impressions of Soviet Russia (1929), Sherwood Eddy, The Challenge of Russia (1931), George S. Counts, The Soviet Challenge to America (1931), Bruce Bliven, "Russia Marches Up a Mountain," New Republic (1931), Charles A. Beard, "The Rationality of Planned' Economy," in America Faces the Future (1932), Rexford G. Tugwell, "The Principle of Planning and the Institution of Laissez-Faire," American Economic Review (1932), Stuart Chase, A New Deal (1932), Chester Davis, "Toward Planned Harvests," Review of Reviews (1933), and Maxwell S. Stewart, "Where Everyone Has a Job," Survey Graphic (1931).

The impact of Soviet planning on American thinkers, many of whom influenced the New Deal, may come out even clearer from a few quotations. The New York Times declared that Stalin's first Five-Year Plan was the "most extraordinary enterprise in the economic history of the world." 10 Stuart Chase proclaimed that it was "exciting, stimulating, challenging." 11 John Dewey said of the Soviet undertaking, "In some respects, it is already a searching spiritual challenge as it is an economic challenge to coordinate and plan." 12 "Why," cried Stuart Chase, "should Russians have all the fun in remaking a world." 13 George Soule said, "We could not assimilate the hard dogmas and terminology of Marxism..., but we were irresistibly attracted by the idea of planned use of modern industrial technique."

Our country flourished within the US because there are no import tariffs between the various states. But notice that labor went south, say, in the textile industry - where there were no labor unions - prior to leaving the country altogether.

A couple key issues that skew things in my mind are official inflation rates as expressed in the CPI. There are a number of "valid" reasons to wish/keep the figures low. One is that so many government pensions and social security COLAs are based on this. But consider that whole swaths of once leading industries are completely expunged from the American scene. Textiles - Gone. Steel is ailing. Machine tools, precision instruments. The US electonics industry was once the envy of the world - completely gutted. Cameras, stereos, radios, televisions, VCR's, etc.

What I see is a huge influx of shoddily made goods which are an ersatz substitute for the quality things that are desirable and last. Inflation is "low" only on paper as I see it.

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